tv Nightly Business Report PBS November 9, 2012 7:00pm-7:30pm PST
be some additional horse trading as we achieve the finality of a grand bargain that would achieve meaningful deficit reduction over the longer term, but i think the door is really open here to at least have a short- run compromise that will get us past the fiscal cliff. >> reporter: the president made his suggestion for a short-term deal. he urged congress to extend tax breaks for the middle class while they work out a bigger plan for a grand bargain. sylvia hall, "n.b.r.," washington. >> tom: while investors remain focused on the fiscal cliff, a further jump in consumer sentiment helped stocks close in the green today. the university of michigan reuters consumer sentiment index this month rose to 84.9. that's its highest level since july of 2007. the dow added four points, the nasdaq was up nine, the s&p 500 added two points. for the week overall, the dow fell 2.1%. the nasdaq dropped 2.6%. and the s&p 500 is 2.4% lower tonight compared to a week ago. >> reporter: while president obama and house speaker boehner both say they're open to new
ideas, wall streeters remain cautious about the fiscal cliff. meridien equity partners' joe greco says the market doesn't expect it to be resolved this year. >> i think we're going to see a push pull back and forth and we're probably not going to see much compromise until mid to late january. if we don't get things in order by february that's when things can start to get ugly for the markets. >> reporter: with so much short- term risks, greco says retail investors are sitting on the sidelines until congress and the president reach consensus on the fiscal cliff. he says today's buyers were mostly institutional investors. >> you're going to see the bulk of volume just sit it out. because that has been what's worked in the past. if you have a position already
it's probably a longer range view in which case no reason to mess around with it in the intermediary push pull. >> reporter: greco says the cliff isn't the market's only challenge. there's still europe's debt crisis and here at home. a long way to go on both the job and housing recoveries. put it all together and we could have the makings of a cheerless holiday season here on wall street. ruben ramirez, "n.b.r.," new york. >> tom: still ahead, tonight's market monitor is watching the fiscal cliff, but thinks the economy and the stock market will continue gaining strength. russell investment's erik ristuben joins us. >> tom: next friday's meeting at the white house over the fiscal cliff comes as credit rating agency standard and poors put the odds of going over the cliff at 15%. beth ann bovino, senior economist at standard and poor's joins us. beth anne, did you hear anything today from either the president or house speaker that gives you more or less hope about a deal before the end of the year? >> well it sounded that both the
president and boehner seemed to be a little bit more interested in working together. now, again this is just one day after the election. so let's see if that holds up. it does look like there are a few olive branches out there. we'll see if it continues. >> putting the odds at one in seven, one in eight we could still go over the cliff. cow agree that that will plunge the u.s. economy into recession and an unemployment rate back over 9%. >> i'm about in agreement with them. i think there are a few details i'm looking for. i look for the bush tax cuts to expire, the payroll tax holiday to expire, and that tow moo is a 3% cracks of the fiscal budget, and that would, indeed, push, in my analysis, push the u.s. back into recession. >> tom: what's the impact if we go over the cliff but are able to pull ourselves back, say, the first or second week in january. some are saying there are some
odds of that happening. we could go over the cliff do see the threat but pull ourselves back. could there be damage done that's irreversible? >> there-- when you think about it, the fiscal cliff is sort of kind of a theoretical thing. the treasury, as we saw last year when we dealt with the debt ceiling crisis. the treasury has been groomed to adjusting so maybe the checks they can't write or the cuts they make might be later in the next few months. it gives them a little bit more time. the bush tax cuts, well, that would happen, but things could be grandfathered back in. the concern i have is the uncertainty. i see the u.s. economy is really starting to show some signs that it's taking hold. the recovery is starting to get stronger, but this uncertainty by the fiscal cliff is in the sense an anchor holding this recovery down. and that's something that's-- >> tom: just a matter of weeks to go before we get to the cliff. beth ann bovino, senior economist at s & p.
>> tom: treasury secretary timothy geithner will stay in his position through president obama's inauguration next year to help with fiscal cliff negotiations. but geithner has said he will not stick around for the rest of the president's second term. treasury secretary is a demanding job and a key assignment in the upcoming negotiations over tax reform and budget cuts. darren gersh details the likely candidates for treasury secretary. >> reporter: jack lew is the name most-mentioned to replace tim geithner at treasury and he is by far considered the man to beat. lew was twice head of the office of management and budget and he's now the president's chief of staff.
>> he is an incredibly hard worker. he is very bright. he has a very deep experience base. he is extremely honest. if you are negotiating with him, you will get nothing but the truth and you can take that to the bank. all those things, you put them together it's not the most common package in washington. >> reporter: republicans are wary of lew, believing he bested them in budget negotiations last year. but the president trusts him and his pick would be a sign of just how important the budget talks are to the second-term agenda. other names often mentioned have more experience in the financial markets. there's former federal reserve vice chair roger ferguson, now c.e.o. of financial services giant tiaa-cref. blackrock c.e.o. larry fink and evercore partners founder roger altman are also reported to be possible candidates. the president could decide to have lew lead budget talks from the white house, while picking someone for treasury who could
handle a different sort of crisis. >> if the markets get nervous or if something else happens somewhere else around the world, pick a country at random, greece, you could need somebody in the treasury department who has very strong credentials with the financial markets. >> reporter: only the president knows for sure who will take over at treasury, but one thing is clear: the next secretary will have an important role. >> the new treasury secretary is going to be doing a real balancing act. obviously, getting the budget on a sustainable path is a huge part of the president's second- term agenda and that falls right to the treasury secretary. but also, there are lots of ways to get there. >> reporter: on wall street, some hope erskine bowles, the co-chair the so-called bowles simpson commission will get the treasury job. but bowles is probably too closely identified with his own views on deficit reduction to take the lead pushing the president's agenda. also, it's no secret most
traders and bankers wanted the president to lose this election, so the white house may not want to go out of its way to find a new treasury secretary wall street will love. darren gersh, "n.b.r.," washington. >> tom: it wasn't as bad as we thought. that's how the government sized up the summer drought which parched the midwest. a report out today says crops fared better than expected. still u.s. farmers probably produced their smallest corn crop in six years. and as diane eastabrook reports uncertainty over the weather could keep prices volatile for months. >> reporter: this morning chicago grain traders sent soybean futures prices tumbling and corn prices see-sawing on the latest news about this year's harvest. the department of agriculture forecast farmers will produce slightly more soybeans and corn than predicted a month ago. >> it did come in a little better than expected and that goes to the technology that we've been able to develop-- that our scientists have been able to put into seeds.
>> reporter: still the summer drought was devastating. the government expects the u.s. corn crop will be about 13% smaller than last year's and the soybean crop could be about 4% smaller. scoville also worries the weather problems that plagued the u.s. will spread to other regions. >> there is still uncertainty as to how the south american situation will turn out. we have had a very delayed planting season down in argentina and southern brazil and there is a chance we could lose some acres there and have them go over to beans. >> the government won't have the final tally on this year's crop until january. but, scoville thinks prices for all grains could remain high until at least the middle of next year because supplies are abnormally tight.
>> tom: the words apple and bear market rarely appear in the same sentence. but the tech giant's stock is officially in bear market territory. while the stock gained nearly 2% today, it's still down more than 20% from it's record high close in september. that's not just bad new for investors in apple shares. it's also weighing on major market indexes. erika miller reports. >> reporter: we've all been warned that one bad apple can spoil the bunch. what's happens on the playground, also goes for the stock market. the recent drop in apple shares is having a negative influence on major market indexes. the stock hit a record closing high of $702 a share back on september 19, now it's about $150 cheaper-- a drop of more than 20%.
so what's at the core of the apple selloff? >> if you are looking to sell, if you are concerned about the market and the fiscal cliff, portfolio managers are either shedding either their largest asset or their biggest winner and apple is likely both. >> reporter: short term, some investors are worried about possible supply shortages of the iphone 5 and whether the ipad mini is priced too high. longer term, there are fears about growing competition from google and microsoft. and concerns about management changes. >> there are concerns about the management team, the transition from steve jobs to tim cook. you had a management shake-up announced recently. you had apple maps released to negative reviews. you have some people who say that wouldn't have happened under steve job's watch. >> reporter: apple's decline is having an outsized influence on the nasdaq 100 and the s&p 500. the tech giant currently has a 17% weighting in the nasdaq 100. that's more than google, intel and amazon combined. apple's weight in the s&p 500 is
about 4% bigger than exxon, g.e. and microsoft. that makes investors in index funds and e.t.f.'s with large holdings in apple more vulnerable. the popular powershares q.q.q. trust has about 17% of its assets in apple. that e.t.f. has fallen about 10% since september 19. although apple drags down indexes when it falls, it also lifts them when it rallies. when you look at the year as a whole, apple shares are up 35%. more than three times as much as the s&p 500. erika miller, "n.b.r.," new york. >> tom: the major markets ended a tough week with small gains. the s&p 500 looked as if the selling would continue early, but was able to climb into positive territory within the first hour of trading. it was a pretty volatile session with a trading range of 18 points. the index finished the day
higher by 0.2%. trading volume was moderate-- 780 million shares on the big board. 1.8 billion on the nasdaq. the tech sector rebounded a little from its recent up 6-tenths of a percent. utilities were down 7-tenths of a percent. leading the drop among utility stocks was st. louis based power company ameren. it's the latest electricity provider to have a disappointing third quarter. shares fell 3.6%. this is a new 52 week low for the stock. like other utilities, ameren has seen its electricity sales drop. thanks to its media networks like sports network espn, walt disney has seen double digit growth for several quarters. but the cost of putting sports on tv is hurting the company this quarter. that was the warning late yesterday from disney. shares fell 6%, down to their lowest price since june. a couple of giant defense contracts were in focus
today, for reasons having nothing to do with the fiscal cliff threat to cut defense spending. boeing rallied 3.2% after announcing it has more than one thousand new orders so far this year. lockheed martin stock gained a fraction during the regular session. after the close the incoming ceo and current president chris kubasik resigned. the company said the executive had a "lengthy, close personal relationship" with another relationship" with another employee. kubasik is married. the head of lockheed's electronics unit, marilyn hewson has been named the number two and the firm. j.c. penney has had a rough go of it, trying to change its image and offerings for shoppers. the company lost a lot more money than feared in the third quarter, losing 93 cents per share. it suffered its worst ever drop in sales at stores open for at least a year.
still, c.e.o. ron johnson said he remains 100% committed to his restructuring plan. shares fell 4.8% on heavy volume. j.c. penney had moved to reduce coupons and sales and that hurt customer traffic. today its pledged it would have a big sale on black friday and release details monday. one ray of sunshine, the boutique stores within a store showed stronger sales and this is a key focus of the company's restructuring. one time deal of the day stock group-on continues to disappoint shareholders. shares lost almost 30% of their value, closing at a record after another disappointing quarter. group-on's european business has been hit hard by the debt crisis there. the company will cut 80 sales jobs as it tries to turn around its fortunes. four of the five most actively traded exchange traded products were higher. the nasdaq 100 fund led the
gains up 0.4%. and that's tonight's market focus. >> tom: no investor can ignore all the sound and fury over the fiscal cliff. after all, the non-partisan the congressional budget office has warned going over the cliff would trigger an economic recession. tonight's market monitor is keeping the long term in mind. erik ristuben is the chief investment strategist at russell investments tonight from seattle. eric, how much of a risk, though, does the fiscal cliff present for long-term investors, in the short term? >> i think the biggest risk is actually trying to time clarity. i think a lot of people have
been saying that, you know, wait until things are clear to enter into the marketplace, wait until all the bad news is out of the system. that generally oppose you up to the biggest mistake of buying too high or, obviously, selling too low. i think the biggest threat is trying to actually be really active in this period. i think having a long-term strategy and the commitment to equity withs makes the most sense. >> tom: we know that in the long-term, the markets are going to reflect corporate profits and corporate earnings, but isn't the fiscal cliff a threat to corporate profits? >> oh, it absolutely is. i think if you look at what we expect and what the broader market expects, we expect not to go over want fiscal cliff. i agree with the c.b.o. if we do, we go into a recession. we think that's a risk. we're pretty sure it will be an ugly debate but we won't go over the cliff. >> tom: you are playing a little defensive with new picks, including a giant multinational health care company pharmaceuticals, pfizer, ppe,
the stock here in the mid-$20 range it has been trending nicely in the last 12 hodges. what do you expect out of pfizer? >> we expect them to continue to move forward. all things being equal, obamacare is probably good for pharmaceuticals. the more insured people, probably good for pharmaceuticals. we us think of the kind of defensive sects on, health care is the most attractively priced. >> tom: all right, you're also looking at consumer stocks in media. time warner, interesting choice here. it's rallynicely from the summertime lows. but, listen, you know, you know where consumers' at tues are. job growth is meager. wage growth is nonnis nonexistent, and the cable bills continue to climb. >> consumer sentiment is actually at a high point. the consumer, i think, will be more willing to spend money now. the funny thing about cable is it oftentimes acts like a utility. one of the latest things people do in a recession or economic hardship is turn off the cable.
i think power and water are ne next. >> tom: time warner, t.w.x., what do you expect out of this stock in the next 12-24 months? >> again, our views are for the broad market is that we're going to see kind of high single-digit returns out of the equity markets over the next 12 months. time warner is an overweight in our portfolio. we expect a little bit more than that. >> tom: you also like e-bay in this regard. consumers looking for a deal out there as well on the auction site. and one that has had a nice rally. no concern it could perhaps be richly valued? >> no, i think there's been so much concern over the ability of the consumer to spend and continue to increase their spend ago apbeit at an extraordinarily modest pace-- we think the economic recovery will continue and people will continue to spend money. e-bay is well positioned in their market. we think market leaders in areas people are going to spend money are well positioned and good stocks to buy.
>> tom: you had a rare sunny day today in the pacific northwest. last time we saw you the sun was out in may, in the springtime. comcast was one of the big winners. microsoft and j.p.morgan chase still lower. you still like the trio? >> jpmorgan is interesting. we talked in mid-may last year, and almost immediately following our conversation, you saw the trading losses reported by jpmorgan. our manager halved their position in jpmorgan. we still own the stock but at a much lower weight. >> tom: you own everything we mentioned? >> through our funds and my investments we're talking with famed global investor mark mobius. hear what franklin templeton's top strategist has to say about emerging markets and the historic leadership change underway in china. and lew hay, c.e.o. of utility, next era energy on the dividend cliff and how tax hikes on dividends could impact his
shareholders. >> tom: finally tonight, after all the billions of dollars spent on the election, those in office now have to work together to solve problems. and that's exactly what lou's been thinking this week. here's author and educator lou heckler. >> i used to tell people that when i ruled the world, everyone would have the same title on their business card: problem solver. isn't that why most of us get paid? a friend of mine asked recently, why is it that so many people just seems to want to argue rather than find an actual solution? good question! i think there might be at least three reasons. inertia: awful lot of people, even though they may argue this, like things just the way they are, even if things are broken. uncertainty: maybe they've been burned a few times or maybe they just hate not knowing the absolute right answer. maybe they have had bosses in
the past who have not been very forgiving when mistakes were made. laziness: i feel bad even including this one, but i am quite sure that some people quit the job long before they quit the organization. mid-level managers i talk with today say that problem-solving skills need to be taught early and often. i wouldn't presume that new hires bring that skill with them. i'm lou heckler. >> tom: that's "nightly business report" for friday, november 9. good night, everyone. we'll see you online at nbr.com and back here monday night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org i'm tom hudson with an nbr news